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2009 strong year for high yield and commodity currency ETCs


Carry trade strategies are back on investors’ radars as high yielding currencies dominated performance on the ETF Securities’ currency ETC platform in 2009.

ETFS Long AUD Short USD surged 32 per cent, ending 2009 as the best performing currency ETC.

It has significantly outperformed other asset classes over the past three and five years, up over 30 per cent and nearly 50 per cent, respectively.

Commodity currencies generated impressive returns in 2009, with the MSFXSM Indices tracking commodity currencies outperforming MSFXSM non-commodity currency indices by an average of over 20 percentage points.

Investors have embraced currency investment via ETCs, driving assets under management on the currency ETC platform to nearly USD50m.

Martin Arnold, senior analyst at ETF Securities, says: "Investors in commodity-linked currencies were the big winners in 2009, as the global economy rebounded and commodity prices surged. On a longer-term view, emerging markets will likely continue to drive demand for raw materials and that should be supportive of ETCs tracking commodity currencies like Australian Dollar and Norwegian Krone.

“However, high performing G10 currencies will need to sustain the pace of growth to continue their upward trajectory. Elsewhere in the G10 group, there are plenty of risk factors that FX investors need to keep a close eye on: sovereign credit ratings will remain an issue in 2010 and the questions of ‘how and when’ the withdrawal of public stimulus measures, which have been extremely supportive of global growth in 2009, occurs.”

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